The curve is bending

The cost curve is bending to a lower slope of less cost acceleration.

The Robert Woods Johnson Foundation has released preliminary 2015 results on medical service pricing:

We have observed many times that growth in health service prices remains extremely low, and this month’s trend report suggests that this trend is continuing, reporting an annual increase in health care prices for 2015 of 1.1 percent, the lowest recorded since Altarum’s series began in 1990. Given the flatness of this series, the two drivers of the recent growth in health spending have been coverage expansion and spending on prescription drugs.

In 2015, the nominal GDP growth was 2.9%.  Inflation was roughly 1%.  Healthcare price inflation was within rounding errors of general inflation.  This is extremely important news.

However cost control is not only a matter of price. It is a matter of quantity.

Everyone expected quantity of services to go up significantly. The CBO had projected a spike in GDP devoted to healthcare spending in 2014 and 2015 because it was projecting the US uninsurance rate to be cut in half.  Below is a November 2013 chart from the  White House  that shows how the CBO anticipated a spike:

WH HC Spend Spike

The RWJF research shows that spike shown through the data:

This month’s results are quite consistent with this foreshadowing. The quarterly trend in overall health spending growth using the Altarum Health Spending Economic Indicators series shows a clear peak in Q1 2015 at 6.7 percent, with subsequent declines every quarter. Partial data for Q4 (October and November) show a spending growth rate of 5.2 percent. While overall spending growth in 2015 will clearly exceed that of 2014, a reduction appears to be underway.

Total spending is a function of the average price per service and the number of services being sold.  Since we expanded access to health insurance and healthcare with the biggest wave of new entrants to the system happening in 2014 and 2015, the number of services being used should have gone up.  They did.  Some of that incremental increase was due to “catch-up care“.  That wave seems to have crested.  The rest of the increment is the “natural” healthcare utilization rate of newly insured people who have had their “gonna kill me now” problems taken care of.

Charles Gaba has argued, the easy large scale additions to the ranks of the insured is complete.

6. The remaining uninsured STILL haven’t a clue about the deadlines and/or tax penalties:

The final factor is one which I’ve written about before, and which there seems to be no obvious solution to: In spite of a massive outreach/marketing/eduction effort by HHS, CMS, HC.gov, the state exchanges, the private insurance carriers, Enroll America, Families USA, Planned Parenthood, the United Way and dozens of other organizations,people STILL had no idea about the deadline and/or mandate tax:

This will change once the large population former Confederate states expand Medicaid at some point in the next decade but there are not big pools of easy conversions readily available.

What does this mean?

The cost curve is bending.  If prices can grow at roughly the rate of inflation and not even nominal GDP quite a few long term federal financing problems go from dire to manageable.



School lunches and Medicaid: a BFD

This is a Big Biden Deal:

Kids who have enough to eat and are not worried about having enough to eat have two significant advantages over kids who don’t have enough to eat and have to worry about that. The first is simple, they have more energy to spend on high intensity activities of play and learning (speaking as a dad of a first grader, those two things should be very close to the same a good chunk of the time). Secondly and slightly more subtly, kids who are not worried about their next meal are able to devote high complexity cognitive processes to other things. Kids (and adults) have a finite amount of brain horsepower available at any given time. Not worrying about food frees up capacity for other things. Kids who are worried about food are devoting a limited brain budget to that task and not to other things.

The free and reduced price school lunch program in most districts except for high poverty districts like the one my family lives in has a significant amount of paperwork and potential stigma attached. Some of that paperwork will deter people who qualify from signing up. Some proportion of those people who are deterred will have signed up for Medicaid or CHIP. Both of those programs have routine income verification processes. Both of those programs are far more valuable on a cash value basis than school lunches so the cost of not hurdling an administrative barrier is higher and more visible. Compliance is higher.

Allowing states to use pre-exisiting data to pre-qualify kids for free or reduced price school lunches will help a few more kids get a quality daily meal or two in their stomachs which should increase their well being in addition to improving school performance. It is also an example of the government working to actively improve peoples’ lives while streamlining the interaction.

This is a good thing now that it is optional. If we could only make it mandatory that states use Medicaid or SNAP eligiblity data to drive the full array of income qualified social services instead of silo-ing different categories of assistance so duplication and administrative burden increases wasted costs without providing qualified individuals the services and assistance that they need.



Seven Years Ago Today: Hope and Change

I don’t know about you, but for me it was an amazing day. Amazing. So many things I never thought I would see in my lifetime. I am so proud of this man and so proud that we worked our butts off to help him get elected.

Here is the C-Span full archive of video of the events of the day.

We cannot backtrack. We cannot.

Consider this an open thread. Cheers.



I Blame Obama

Here’s a piece of unequivocal good news with which to start the last full year of the Obama presidency:

The executive director of the United States Interagency Council on Homelessness, which coordinates the federal response on the issue, said in a letter to Mayor Bill de Blasio this week that [New York] city had “effectively” ended chronic homelessness among veterans.

Lives change:

In 2015 alone, the city placed more than 1,000 veterans in permanent housing, according to city officials. Several weeks ago, at Clinton Avenue Residence, a new 43-unit development in the Bronx specifically for veterans, several men dragged garbage bags with their belongings through the gleaming lobby and into their studio apartments.

“I woke up and there wasn’t a person sleeping three feet away,” Eric Peters, 54, an Air Force veteran who has been in and out of homelessness for decades, said the next morning.

Mednyánszky,_László_-_Reclining_Soldier_(ca_1916)

New York City is doing better than many places, though not uniquely so.  Homelessness among vets is down 36% nationwide, and, as The New York Times reports,

 Houston, Las Vegas and New Orleans, among several cities, [have] effectively ending overall veteran homelessness, meaning they have identified all homeless veterans, not just the chronic cases, and placed them in homes.

Why has this happened? Because:

The city’s efforts are part of a broader federal initiative, started under President Obama and aimed at ending veteran homelessness in the United States. The federal housing agency, working in partnership with the Department of Veterans Affairs, has now distributed 79,000 rental assistance vouchers to veterans across the country dating to 2008.

Three cheers for both the hard work being done at both the national and local levels.  I hope the program serves as a model to tackle homelessness writ large — but I have no problem with selecting veterans as the first to demonstrate that the world’s last superpower does not in fact have to house its people in cardboard boxes.

But I do want to point out what’s obvious in this crowd, and should be so in the wide world:  this is what respect — and more, support — for those who serve our military looks like.  The next time your wingnut acquaintance spouts about the Muslim Kenyan Usurpers disregard for the armed services, point this out to her or him — and ask him which GOPster has made this a priority.

Happy new year all.  Going to be an interesting ride in this year of our [insert pasta shape here] 2016

Image:  Ladislav Medňanský, Reclining Soldier, c. 1916.



Public option and provider reimbursement nudges

On Twitter, there is a long and productive discussion about provider pricing and the recent study on commercial payer rate variations.  Part of the discussion went back to this Washington Post article on price suppression from October 2010.

 

The administration decided not to seek lower drug rates for Medicare, and it didn’t press for a “public option,” a government-run insurance plan that people under 65 could buy into. While supporters of the public option sold it as a way to compete with insurers, the real target was hospitals and doctors. A public option would have created a nationwide purchaser of health care that could have exerted leverage on providers to cut prices. This would have lowered the law’s costs by reducing the subsidies needed to make insurance affordable….

“The public hates the insurance industry and trusts doctors and hospitals,” said Richard Kirsch, head of the liberal coalition Health Care for America Now. “But what killed the public option was the hospitals, not the insurance industry.”

The public option would have been a marginal pressure to reduce prices.  There were several flavors on how providers would be paid in a  public option.  The two most common were Medicare plus X where X was some percentage between 5% and 15%, and negotiated rates.

Under Medicare plus 5% or Medicare plus 15%, the public option would be a non-differentiated product in competitive insurance markets and a narrow network product in non-competitive markets. Mayhew Insurance is in a competitive market region for the Exchanges.  The lowest priced Silver plans offered by all of the insurers in this region are narrow network HMOs where the providers get paid Medicare rates plus 5% to Medicare plus 10%.  The public option would be just another plan that is in the cluster for the 2nd Silver subsidy point.  If the network is a broad network like the rest of Medicare, the public option would probably be overpriced compared to similar products because the public option network would include a lot more high cost providers than the targeted narrow networks.

In noncompetitive payer and provider markets, the public option at Medicare plus 5% or Medicare plus 15% would be a fairly narrow network.  Medicare can get away with offering fairly low rates in non-competitive markets and still have most hospitals and providers sign up for traditional Medicare because Medicare can promise volume.  The Exchanges can’t promise volume.  The Exchanges for this year are projected to insure 4% of the US population, and it is a fairly low utilizing population when compared to Medicare.  That means providers don’t need the Exchange volume to cover their fixed costs.  Under a Medicare plus X regime, quite a few providers would not sign the contract.  They would not want to set a precedent of taking Medicare based rates.  So the public option in provider dominated markets would keep the dominant insurer honest but the pricing differential after a year or two would not be tremendous.

If the public option was a negotiated rate product, it would be similar to the 2nd Silver chasing products in competetive markets.  In minimally competitive insurance markets, it would probably have a broader network than it would under a Medicare plus X scheme but the pricing difference between it and the lowest priced Silver from the dominant carrier would be smaller.

I think the public option is something that should always be presented by progressives as a budget pay-for as it will produce significant savings to the federal government through lower subsidy levels but it is not a panacea.  The Exchanges are not big enough pools of patients and dollars to drive hospitals and other providers to completely change their pricing models.



Jobapalooza Open Thread

jorbs

Another good month for JORBS, plus 211K on payrolls for November, plus 35K upward revisions to September and October, unemployment rate remains at 5.0%, labor force participation rate unchanged at 62.5%, black unemployment at 9.4% (down from 11.0% this time last year), the U-6 at 9.9%.

68 straight months of JORBS from President Malcolm The Wiz Live Shabazz X Mo Dee, which means we should probably expunge him from the record books and just pretend the economy responded positively to Sen. John McCain and eight years of anticipation of the incoming Trump/Cruz administration.

Good stuff, but good enough for a Fed rate hike?  Markets seem inclined to believe one is coming.

Open thread.



Good news everybody

In 2014, the nominal economic growth rate in the US was 3.91%.  Not a great number but not a bad number.

In 2014, healthcare spending grew by 5.3%.  Given context that is a great number

Total spending for health care in the United States increased 5.3 percent and reached $3.0 trillion in 2014, or $9,523 per person (Exhibit 1). This was faster than the rate of growth in 2013 (2.9 percent), which was the lowest in the fifty-five-year history of the National Health Expenditure Accounts. The acceleration in health spending growth in 2014 followed five consecutive years of historically low growth, which averaged 3.7 percent. Health care spending grew 1.2 percentage points faster than the overall economy in 2014 (when the nominal gross domestic product [GDP] increased 4.1 percent), resulting in a 0.2-percentage-point increase in the health spending share of GDP—to 17.5 percent. By comparison, the health spending share of GDP remained between 17.3 percent and 17.4 percent from 2009 to 2013.

The past few years had seen healthcare spending at or below nominal growth in the economy.  That led to a stabilization or decline in healthcare spending to GDP ratio for several years which is a massive deal for long term federal fiscal planning.

But 2014 saw the share of GDP going to healthcare go up.  Did something strange happen in 2014?

Why yes, 15 million more people got coverage and they used that coverage.

If it costs .2% GDP net to cover 15 million or more people that is dirt cheap and a good value for the money.

And a final piece of intriguing potential for good news: